19321219_Minutes.pdf

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A meeting of the Executive Committee of the Federal Reserve Board

1148 held in Washington on Monday, December 19, 1932, at 11:15 a.

lie a

PEESEUT: Governor MeyerYr. HmnlinEr. TamesEr. Magee

Er. Morrill, SecretaryEr. McClelland, Assistant SecretaryEr. Harrison, Assistant to the GovernorEr. 7Tyatt, General CounselMr. Siems, Federal Reserve Examiner.

The ComrAttee considered and acted upon the following matters:

Letter dated December 15, 1932, from the Secretary of the Federal

1'78 Bank of New York, and telegram dated December 16, 1932, from the

rrIQft of the A3deral deserve k of San Francisco, both advising that(kai

rect i„

O 2 their boards of directors on the dates stated no changes werekqe

the banks' existing schedules of rates of discount and purchase.

lithout objection, noted with approval.

Tblegraphic reply, approved by five members of the Board on Decernber17,

to telegrams dated December 16, 1932, from the Governor of the,terft,

deserve Bark of Philadelphia, renuesting authority for an advance,

40t, t

A ° the 7irst National Bank, Darby, Pennsylvania, in the amount of

Q%000

PI.

a period of sixty days, with interest at the rate of 5 1/c1)elt

and collateraled by unsecured Promissory notes totaling A9,505;

111°1" lorris statilv, that the bank has advised that the advance is desiredto

rneet410Le withdrawal of Christmas savings deposits. The reply stated thatt)a

t4°rdance with the provisions of section 10(b) of the Federal iieserve

tle4gect.

-‘1L authorizes the advance subject to the terms and conditions recon

Approved.

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

12119/32 72-

Telegraphic reply, approved by three members of the Board on Decem-

ht17, to a telegram dated December 16, 1932, from Deputy Governor Rourlis

"the eederal Aeserve Bank of New Yolk, requesting authority for the purchase

t:44xthe Bank of Nutley, New Tersey, of tax notes of the Town of Nutley, in

411 4ra0lint not to exceed :)200,000; the reply stating that the Board authorizes

the PlIrchase with the understanding that the notes meet all requirements of

-Lation E except that the net funded indebtedness of the municipality

ll'tileede 10% of the valuation of its taxable property and that the amount of

144418 to be offered exceeds 25% of the total amount of outstanding warrants

"hb municipality.

543

Approved.

Report of the Committee on Salaries and Expenditures on a letter

414teti December 9, 1932, from Ur. T. S. Walden, Controller of the eederal

4411411I'b Bank of Richmond, requesting authority for changes in the personnel

144841fication plans of the head office and Charlotte branch to provide for

bet r1-'4!VartlaB lit& to be called the "Reconstruction Finance Corporation-Custodian

beDez+,,wAent" and for ten positions in the department at the head office and

414,,voeitions in the department at the branch; the Board's committee recomr.

1141Airit.approval.

Approved.

Letters to the Federal Reserve Agents at Philadelphia, Dallas and

-"maisco, approved by three members of the Board on December 17, 1932,

"Igard, respectively, to the continuous reserve deficiencies of the

)4et 1-Tational Bank of Bangor, Pennsylvania, the First National Bank, Lockney,ttkIte

and the First Savings and Trust Company, Colfax, Washington; the14Itte

11) stating in the first two cases that the Board will take no action at


544

12/19/32this tine with regard to the deficiencies other than to forward copies of

the agents' letters to the Acting Comptroller of the Currency for the infor-

icm of his office, and in the latter case, that the Tleard will defer

e°r4sideration of the matter pending the receipt of additional information.

Approved.

Letter to the Federal Reserve Agent at Chicago, approved by three

kett—'4"a of the Board on December 17, 1932, suggesting, in view of the infor-

1444°11 disclosed in the analysis of the report of examination of the Detroit

41riliCs Bank, Detroit, I:dchigan, as of September 19, 1932, that the Federal

Oeagent discuss with the connissioner of the banking department of the

tte of Flichin.;an the matter of a further reduction in the rate of dividends

bY the member bank, and requesting that the agent advise the Board of

thel'eaults of such discussion.

4elab

Approved.

Letter to the Federal Reserve Agent at Dallas, approved by three

el'e of the Board on December 17, 1932, referring to the unsatisfactory

Itimn of the Zarmers State Guaranty Bank, Valiant, Oklahoma, as dis-q.eae,

I by the analysis of a report of examination as of September 17, 1932,

414 etni-4---Lng that, although the reason for the delay of the Banking

kb,810ner of Oklahoma in taking corrective action is not apparent, the

cz(tvecl

t4,' in accordance with the agent's recommendation, will take no action in

-er at the present time, but requests that the agent arrange for

Pation in the next exanination, and if the condition of the institution

40t been materially improved at that time, that the agent discuss withthe, g4king Comndssioner and, if necessary, with the management of the bank,

'-'1.esti0n of obtaining the necessary financial assistance to cover all


44

"119/32 -4-

515

eatimated losses, together with additional losses which nay develop in

4s8ets classified as doubtful.

Approved.

Reply, approved by three members of the 3oard on December 17, 1932,

to 4 letter dated December 6, 1932, from the Federal ileserve Bank of St.

al inclo3ing a notice filed by the First State Bank of Brownsville,

-2see, under date of December 2, 1932, of its intention to withdraw from

.4rbel*°111P in the federal Reserve System, with the request that it be per-

bitted to withdraw imnediately. The reply stated that, in view of the

tlellteS recommendation and the reasons set out in his letter, the Board

Nve,' the usual requirement of six months notice of intention to withdraw

Z04a to Permit the member institution to w ithdr aw from membership immediate-

Approved.

Reply, apl)roved by three members of the Board on December 17, to a

lettedated December 2, 1032, from Tx. F. G. Buckstaff, Anthony, Texas,

whether the Federal Reserve Life Insurance Company of Kansas City,

44143tia 4.1-8 connected with a Federal reserve bank. The reply stated that the

448 or

ethe words "Federal" or "reserve" in the corporate names of institutions

()Ialected with the Federal Reserve System is misleading to the public andth4t

th

' of 1,lay 24, 1926, private corporations were forbidden to use the words

Dortion of their corporate name; that this act is not retroactive andNe 4

°t apply to corporations actually engaged in such business under suchAoke 0

r title prior to 1.,:ay 26, 1926; and that the company referred to,

the Federal Reserve Board is strongly opposed to such practice; that by


54G

I'V10/32 _5-

"e°1'clinc; to the Board's inforraation, has been in business since several

/7e&118 prio.c to that date and is not affected by the statute.

Approved.

The Secretary then presented a telec;rari just received from the Fed-

Reserve Agent at Kansas City, advising of the sudden death on December

le) 1932, of Er. ',Tinian Hee, one of the bank's appointees to the directorate

r the Oklahoma City branch.

17:oted with regret.

At this Point Lessrs.R. L. Austin, Federal Reserve Agent at

l'hila(lelPhia, and James • Brittain of Counsel for the Federal Reserve Bank

t lililadelphia joined the meeting.

Llr. Austin stated that Governor 1:orris, upon returning from

klzhi11,-ton. after mectin',; with the Board on December 15, 1952, had advised

thz.t the Board felt the -ilederal Reserve Bank of Philadelphia and,

1\11itieularly the Vederal reserve agent's office, was subject to criticism

lic)t reporting promptly to the Board the facts concerning the organization

--° 1.--ain Line Trust Company, Ardmore, Pennsylvania, which opened for

es8 on November 15, 193, and that he had come to Washington to discuste

1114tt°r With the Board.

14 connection with the subject of the discussion there was presented(i letter

received from the Governor of the Philadelphia bank under date of

1)eeel/lber 16, 19s2, referring to the organization of the Federal Reserve Bank

l'11114(lelphia and stating that the operating side of the bank has had no

%Ieetion with questions of admission of banks to melbership except as they

eet the extension of credit, that when 1.1.r. C. S. Yewhall, :xecutive Vice

(leht of the Pennsylvania Company for Insurances on Lives and Granting


12/19/32 -6-

presented to him the matter of the holding by the Pennsylvania

CON,Of the stock of the 1, aim Line Trust Company, he had referred L.

17"4411 to 1:r. Austin; that upon reading the 3oard's letter of October 20,

4321 to Austin, Governor orris felt it was re-;rettable that the Board

ctild State Banking 1)epartraent of Pennsylvania should assume diametricall7

ite views of the matter; that he called the hoard's counsel on the

tele1)11°1-ba and inquired whether he thought it would be worth while to request

l'ec°1los1deration, and. had concluded from .t_r, ',7yatt's reply that such a re-

(11".t would not be worth while; that shortly after, in a casual conversation

With 1--r• l':ewhall, the latter had advised that the Pennsylvania Company had

114der'llacussion with counsel a dividend to the shareholders of the company

444 the- Purchase by the stockholders of the company of the stock of the new

Uti°11; and that the next information he received concerning the matter

11,

Itfaa1711en he heard read at the meeting of the Federal Reserve 'Board on

beeetz

14,6 kat' attention was called to the fact that in his letter to the

11,;41z,a 0

t December 16, 1932, he recommended that the Federal Reserve Board

ktliorize the Pennsylvania Company to acqt.lire and hold the capital stock of the4414

11414° bent'n,-- se of his feeling that it was desirable, in the light of the

4411

tte4: Of October 20, 193 2 had stated that the attitude expressed in that

ez 15, 1932, L. Austin's letter of December 14.

'Ourin:, the discussion, 1,:r. Austin stated that he felt, and in his

210111.-• with Governor l'r.orris at the tiro of the receipt of the Board's

letterv'las the correct one for the Federal Reserve Board to take in view of

.1)

Pese of the provisions of section 9 of the Federal Reserve Act. ;Then

me Trust Cormany of Ardmore, he stated that the recommendation was

etti,existinc, locally; that the control of any bank orr,ani'z,ed in Ardmore


548

14 thethe

-7-

811°111d be in stronc; hands, and on the theory that the acquisition of the

Btock would not be a violation of the letter of section 9, even though

°Iltl'arY to the spirit and purpose of the provisions of that section. His

e nation of this reconnendation indicated that he felt that the natter of

etce .ninc the propriety of action not contrary to the express provisions

"the law was one solely for determination by the Federal Reserve Board.

During the discussion it also appeared from the statements made by

114 411stin and supplemented by I:r. Brittain, that upon receipt of the

13(krd's letter of October 20, 1932, advisinj, of refusal of the Pennsylvania

C(11)anYte application to purchase the stock of the bank to be organil-,ed in

4*101'e) rz. Hill, assistant Federal Reserve Agent at Philadelphia, sent a

e°131' Of the letter to Lir. Newhall, who requested 1-r. Hill to discuss the

ktittel.- with the company's counsel, which he did; that the company's counsel

11 c1,-Presented that the arran:enent to be effected would put the ownership

stock of the new bank in the hands of private individuals; that the

1°I-Itions to be adopted by the company were discussed; that the cjiestion

klether the proposed action would meet the requirements of the law was not

ki ed at that time, but that following his discussions with the company's

0e1 -•Hill discussed the matter with Hr. Austin. In this connection

1(31s1.1-11 stated that last week, immediately upon learning from a routine

4'4)c)rt- ceived by the Board's Division of Bank Operations that a new bank

ell organized in Ardmore, 1,r. Siems had called Hr. Hill on the telephone

114q he

(Ivised that the /*bin Line Trust Camnany had been organized under

eJla 1-144'- cee of the Pennsylvania Company, that the natter had been discussed

- ederal reserve agent's office, but that it had not been reported to

'x'a at the tir for the reason that it was thought it might be


It was indicated to Er. Austin that the ownership by trustees for the

b6rierit of shareholders of the Pennsylvania Company, of the stock of the Pain

Trust Company of Ardmore would seem to be contrary to the spirit of the

131'°v1s1oris of section 9 of the ,i`ederal Reserve Act for the same reasons that

4111ect of the stock would be objectionable. It was nlso called to

4111 • 8tin's attention that by not raising the question with the Pennsylvania

CotipaiiY as to whether its Proposed action would be in accordance with the

t8 Position, the Federal reserve agent's office may have led the bank

to be,-"eve that the transaction would not be objectionable to the Board.

4'18 connection reference was made to the Board's letter of May la, 1931,

to,-

* Lewhall setting :orth the understanding of the Board, arrived at

13/71-11C. a conference with r. Fewhall, that the T'ennsylvania Company would

roati.anY additional Purchases of bank stocks without first securin7 the

al of the Board.

14 the-L'ederal reserve agent's office about reporting the matter to the

4-r. Austin stated that he felt the matter would be reT)orted in dueetx1,1e

in the report of a recent examination of the Penn.sylvaria. Company whichliow

I 1V19/32 -8-

ellbarraosin':; to the Board.

Mr. Austin stated that He believed the Pennsylvania Cormany had

"ted in good faith in the ratter az:d in the belief that their action would

licit be contrary to the Position taken by the Board in its letter of October20.

I/1 response to an inquiry as to whether there had been discussion

Preparation, and that he did not see that anythini could have been

With regard to the action of the member bank or how the Federal reservebe4lit

, '31-11(1 have prevented it inasmuch as the bank Was proceeding within its•ko /iti

l'ir.thts. It was pointed out to Pr. Austin that had the information core


12 /19 /32 _9-

ar50

to tle Board before the new bank was opened for business, something might

1141te been done to obviate the situation which has developed and that the

41ber bank Probably would not have desired to proceed with the matter if

tale(:)aru's position had been ascertained in advance.

Governor Lieyer stated that it would appear

tice the Board that, upon receipt of the advice

tter of October 20, the Pennsylvania Company

111411 the effect of which was to circumvent the

byother form of holdin',,; of the stock of the

from the information be-

contained in the Board's

had undertaken to devise a

Position taken by the Board

new bank, and that the :-.'ederal

le1"170 agent, in not reporting the 'latter pronptly to

the

the Board or raising

cille2tion with the member institution as to whether its action would be

c-ionable to the Board, had tacitly approved the merber bank's action.

-4-8o stated that the Federal reserve agent should not in any circumstances

hoc itate to report a matter to the Federal Reserve Board because

/le that it might be a cause of embarrassment.

At the conclusion of the discussion, 111.. Austinwas advised that the Board would give further con-

sideration to the matter and would advise hita in due

course of the action to be taken. Thereupon Messrs.Austin and Brittain withdrew from the meeting.

of any

Harrison stated that during the meeting Er. Brittain had ad-

that, in his opinion, the Federal reserve bank was clearly in

in not

*4141 "titUde of the Federal reserve bank in the matter had been influenced

its feeling that

reportinf.; the above matter to the Board and that undoubtedly

the organization of the new bank by the Pennsylvania

.C(:)14141,3az Was desirable.

la% *Jyatt stated that in his telephone conversation with Governor

iollowin7 the receipt of the Board's letter of October 20, referred


12/19/32 -10-

551

to in the Governor's letter of December 16, Governor rorris said that he had

11°‘f discussed the natter with the Pennsylvania Company; that he inruired of

as to what the Board's attitude would be with regard to trusteeir-

the stock of the new bank; that he advised Governor Forris that he did

11°t 1:now what the position of the Board would be, but that his opinion was

114t the Board would object to the stock of the new institution being held

that manner for the sane reasons that it objected to the direct holding

the stock by the Pennsylvania Company; and that he particularly advised

Qirel'nor :orris that the Governor or the Federal reserve agent should report

to the Board any such proposed action of the Pennsylvania Company.

Mr. Hamlin then presented a memorandum dated December 10, 10,

'ekl'e2ced to :Ir. lorrill by 1.7r. Paulger, 3hief of the Division of Examinations,

411(itththat in the report of examination of the Continental Illinois Bank and

1„tCora.Pany as of Tune 17, 1932, made in anticipation of action upon an

%1.'cation for conversion into a national bank, there was included a report

kv.e .1'14E: the Continental Yational Company, a wholly owned affiliate, among

te jflvestments of which was a note signed by Alex F. Banks, C. 7. Glore and

Stevens in the =mint of .1,341,772.05, secured by shares of the

°(41ti1lentai Illinois Bank and Trust Company with a market value as of I.ay 31,

1321 °r %154,411, and that it is assumed that the hr. Stevens referred to is

ene M. Stevens, now Federal Reserve Agent at Chicago. 1.7r. Hamlin

13°Inteaout that the note may have been executed before Ir. Stevens became

reaerve agent, but that as it is collateraled by bank stock the

Is presented as to whether Er. Stevens has complied with the require-

or the law that a class C director shall not be an officer, director,tkao

ee or stocklaolder of any bank, and that in the circumstances he be-


1/19/32lieved

-11-

the natter should be investigated.

Accordingly, upon motion of Lr. Hanlin, thematter was referred to the Committee on DistrictHo. 7, (T:essrs. Eagee and for investigationand report to the Board.

552

Ileoorts of Standing Committee dated December 15 and 16, 1932, recom-

tacling approval of the following changes in stock at Ifederal reserve banks:A

cati on for ORIGINAL Stock: Shares

krtners National Bank in Glasgow, Kentucky. 72AD 1,

Catjo for ADDITIONAL Stock:7.

Au 711 National Bank, Brazil, Indiana.Iticree.se in capital and surplus)

cations for SURIENDER. of Stock:rict 1,:o. 3.illtown National. Bank, Dewningtown, Penna.(COn• of Downingtown National Bank andQ.,range National Bank of Chester County at-uowningtovm)

liatrict No. 7.Deer County- Bank, Imlay City, Lich. ( Insolvent) 41

4143tr•Chi let No. 9.

118 National Bank, Houghton, Filch. (V.:I-Abs.kteulr Iioughton National Bank) 90

t liational Bank, Flandreau, S. Dak. (Insolvent) 36

4etrro. 11.

feat Hational Bank., Fort Towson, Oklahoma.'11•L• Terminal)

b4atro. 12.

4kA tional Bank in Coeur d'Alene ,Idaho. (V.L.0t3'kr. • by American Trust Company, aorurember)zt

—"Iona Bank in Aurora, Oregon. (V.L.Suc.f-'',Q•riby Union Bank, nonmember)

Approved.

72

27 27

96

17

72

20 Total

upon the rrm eting adj ourned.

Aph

Secretay.

96

41

126

17

92372


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